The 10 Worst Corporate Accounting Scandals of All Time Tweet Share this infographic on your site! <a href=""><img src="" alt="The 10 Worst Corporate Accounting Scandals of All Time" width="500" border="0" /></a><br />Source: <a href="">Accounting-Degree.org</a> Embed this infographic on your site! <a href=""><img src="" alt="" width="500" border="0" /></a><br />Source: <a href="">Accounting-Degree.org</a> The 10 Worst Corporate Accounting Scandals of All Time If there is one theme to rival terrorism for defining the last decade-and-a-half, it would have to be corporate greed and malfeasance. Many of the biggest corporate accounting scandals in history happened during that time. Here's a chronological look back at some of the worst examples. Waste Management Scandal (1998) Company: Houston-based publicly traded waste management company What happened: Reported $1.7 billion in fake earnings. Main players: Founder/CEO/Chairman Dean L.

Buntrock and other top executives; Arthur Andersen Company (auditors) How they did it: The company allegedly falsely increased the depreciation time length for their property, plant and equipment on the balance sheets. How they got caught: A new CEO and management team went through the books. Penalties: Settled a shareholder class-action suit for $457 million. SEC fined ArthurAndersen $7 million. Fun fact: After the scandal, new CEO A. Maurice Meyers set up an anonymous company hotline where employees could report dishonest or improper behavior. Enron Scandal (2001) Company: Houston-based commodities, energy and service corporation What happened: Shareholders lost $74 billion, thousands of employees and investors lost their retirement accounts, and many employees lost their jobs. Main players: CEO Jeff Skilling and former CEO Ken Lay. How they did it: Kept huge debts off balance sheets. How they got caught: Turned in by internal whistleblower Sherron Watkins; high stock prices fueled external suspicions. Penalties: Lay died before serving time; Skilling got 24 years in prison. The company filed for bankruptcy. Arthur Andersen was found guilty of fudging Enron's accounts.

Fun fact: Fortune Magazine named Enron "America's Most Innovative Company" 6 years in a row prior to the scandal. WorldCom Scandal (2002) Company: Telecommunications company; now MCI, Inc. What happened: Inflated assets by as much as $11 billion, leading to 30,000 lost jobs and $180 billion in losses for investors. Main player: CEO Bernie Ebbers How he did it: Underreported line costs by capitalizing rather than expensing and inflated revenues with fake accounting entries. How he got caught: WorldCom's internal auditing department uncovered $3.8 billion of fraud. Penalties: CFO was fired, controller resigned, and the company filed for bankruptcy. Ebbers sentenced to 25 years for fraud, conspiracy and filing false documents with regulators. Fun fact: Within weeks of the scandal, Congress passed the Sarbanes-Oxley Act, introducing the most sweeping set of new business regulations since the 1930s. Tyco Scandal (2002) Company: New Jersey-based blue-chip Swiss security systems. What happened: CEO and CFO stole $150 million and inflated company income by $500 million.

Main players: CEO Dennis Kozlowski and former CFO Mark Swartz. How they did it: Siphoned money through unapproved loans and fraudulent stock sales. Money was smuggled out of company disguised as executive bonuses or benefits. How they got caught: SEC and Manhattan D.A. investigations uncovered questionable accounting practices, including large loans made to Kozlowski that were then forgiven. Penalties: Kozlowski and Swartz were sentenced to 8-25 years in prison. A class-action lawsuit forced Tyco to pay $2.92 billion to investors. Fun fact: At the height of the scandal Kozlowski threw a $2 million birthday party for his wife on a Mediterranean island, complete with a Jimmy Buffet performance. HealthSouth Scandal (2003) Company: Largest publicly traded health care company in the U.S. What happened: Earnings numbers were allegedly inflated $1.4 billion to meet stockholder expectations. Main player: CEO Richard Scrushy. How he did it: Allegedly told underlings to make up numbers and transactions from 1996-2003.

How he got caught: Sold $75 million in stock a day before the company posted a huge loss, triggering SEC suspicions. Penalties: Scrushy was acquitted of all 36 counts of accounting fraud, but convicted of bribing the governor of Alabama, leading to a 7-year prison sentence. Fun fact: Scrushy now works as a motivational speaker and maintains his innocence. Freddie Mac (2003) Company: Federally backed mortgage-financing giant. What happened: $5 billion in earnings were misstated. Main players: President/COO David Glenn, Chairman/CEO Leland Brendsel, ex-CFO Vaughn Clarke, former senior VPs Robert Dean and Nazir Dossani. How they did it: Intentionally misstated and understated earnings on the books. How they got caught: An SEC investigation. Penalties: $125 million in fines and the firing of Glenn, Clarke and Brendsel. Fun fact: 1 year later, the other federally backed mortgage financing company, Fannie Mae, was caught in an equally stunning accounting scandal. American International Group (AIG) Scandal (2005) Company: Multinational insurance corporation.

What happened: Massive accounting fraud to the tune of $3.9 billion was alleged, along with bid-rigging and stock price manipulation. Main player: CEO Hank Greenberg. How he did it: Allegedly booked loans as revenue, steered clients to insurers with whom AIG had payoff agreements, and told traders to inflate AIG stock price. How he got caught: SEC regulator investigations, possibly tipped off by a whistleblower. Penalties: Settled with the SEC for $10 million in 2003 and $1.64 billion in 2006, with a Louisiana pension fund for $115 million, and with 3 Ohio pension funds for $725 million. Greenberg was fired, but has faced no criminal charges. Fun fact: After posting the largest quarterly corporate loss in history in 2008 ($61.7 billion) and getting bailed out with taxpayer dollars, AIG execs rewarded themselves with over $165 million in bonuses. Lehman Brothers Scandal (2008) Company: Global financial services firm. What happened: Hid over $50 billion in loans disguised as sales.

Main players: Lehman executives and the company's auditors, Ernst & Young. How they did it: Allegedly sold toxic assets to Cayman Island banks with the understanding that they would be bought back eventually. Created the impression Lehman had $50 billion more cash and $50 billion less in toxic assets than it really did. How they got caught: Went bankrupt. Penalties: Forced into the largest bankruptcy in U.S. history. SEC didn't prosecute due to lack of evidence. Fun fact: In 2007 Lehman Brothers was ranked the #1 "Most Admired Securities Firm" by Fortune Magazine. Bernie Madoff Scandal (2008) Company: Bernard L. Madoff Investment Securities LLC was a Wall Street investment firm founded by Madoff. What happened: Tricked investors out of $64.8 billion through the largest Ponzi scheme in history. Main players: Bernie Madoff, his accountant, David Friehling, and Frank DiPascalli. How they did it: Investors were paid returns out of their own money or that of other investors rather than from profits. How they got caught: Madoff told his sons about his scheme and they reported him to the SEC.

He was arrested the next day. Penalties: 150 years in prison for Madoff + $170 billion restitution. Prison time for Friehling and DiPascalli. Fun fact: Madoff's fraud was revealed just months after the 2008 U.S. financial collapse. Satyam Scandal (2009) Company: Indian IT services and back-office accounting firm. What happened: Falsely boosted revenue by $1.5 billion. Main player: Founder/Chairman Ramalinga Raju. How he did it: Falsified revenues, margins and cash balances to the tune of 50 billion rupees. How he got caught: Admitted the fraud in a letter to the company's board of directors. Penalties: Raju and his brother charged with breach of trust, conspiracy, cheating and falsification of records. Released after the Central Bureau of Investigation failed to file charges on time. Fun fact: In 2011 Ramalinga Raju's wife published a book of his existentialist, free-verse poetry.

Enron Corporation - SourceWatch Enron Corporation Jump to: navigation , search This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation . Learn more about corporations VOTING to rewrite our laws. This article has been placed under review. See also EOG Resources , formerly Enron Oil & Gas. The ENRON Corporation was a corrupt energy company based in Houston, Texas that went bankrupt as a result of committing institutionalized, systematic and well-planned accounting fraud. Since it's fall, it has become a symbol of corporate fraud and corruption. Enron was an energy trading and communications company based in Houston, TX employing around 21,000 people by the middle of 2001. Careful accounting strategies allowed it to be listed as the seventh largest company in America, and it was expected to dominate the trading it had virtually invented in communications, power and weather securities. Instead it became the biggest corporate failure in history. Contents _ Ties to the American Legislative Exchange Council Enron was a corporate funder of the American Legislative Exchange Council (ALEC) [1] [2] . See ALEC Corporations for more.

About ALEC ALEC is a corporate bill mill. It is not just a lobby or a front group; it is much more powerful than that. Through ALEC, corporations hand state legislators their wishlists to benefit their bottom line. Corporations fund almost all of ALEC's operations. They pay for a seat on ALEC task forces where corporate lobbyists and special interest reps vote with elected officials to approve “model” bills. Learn more at the Center for Media and Democracy's ALECexposed.org , and check out breaking news on our PRWatch.org site . The fall of Enron After a series of scandals involving irregular accounting procedures bordering on fraud involving it and its accounting firm Arthur Andersen , Enron stood at the verge of undergoing the largest bankruptcy in history by mid November 2001. A white knight rescue attempt by a much smaller energy company, Dynegy , was not viable. The fall of the value of investors' equity per share in Enron during 2001 was from $85 to 30 cents. As Enron was considered a blue chip stock, this is an unprecedented and disastrous event in the financial world.

Enron's plunge in value occurred after it was revealed that many of its profits and revenue were the result of deals with limited partnerships which it controlled. The result of this is that many of the losses that Enron encountered were not reported in its financial statements. The firm's European operations filed for bankruptcy on November 30, 2001, and sought Chapter 11 protection in the US. The long term implications of Enron's collapse are unclear, but there is considerable political fall-out both in the US and in the UK relating to the monies Enron gave to political figures (around $6m since 1990). Enron was formed in 1985 with the merger of Houston Natural Gas and InterNorth , engineered by Houston Natural Gas CEO Kenneth L. Lay . It was originally involved in the transmission and distribution of electricity and gas throughout the United States and the development, construction and operation of power plants, pipelines, etc. worldwide. Enron grew wealthy through its pioneering marketing and promotion of power and communications bandwidth commodities, and related risk management derivatives as tradable securities, including exotic items such as weather derivatives.

As a result Enron was named "America's Most Innovative Company" by Fortune magazine for five consecutive years, from 1996-2000. It was on Fortune's "100 Best Companies to Work for in America" list of 2000, and was legendary even amongst the elite workers of the financial world for the opulence of its offices. Its global reputation was undermined, however, by persistent rumours of bribery and political pressure to secure contracts in Central and Southern America, in Africa and in the Philippines. Especially controversial was the $30bn contract with the Indian MSEB (Maharashtra State Electricity Board), where it is alleged that Enron officials used political connections within the George Walker Bush administration to pressure the Indians . On January 9, 2002, the U.S. Department of Justice announced it was going to pursue a criminal investigation of Enron and Congressional hearings began on January 24. Former Enron CFO Andrew Fastow , alleged mastermind behind Enron's complex network of offshore partnerships and questionable accounting practices, was indicted on November 1, 2002, by a Federal grand jury in Houston on 78 counts including fraud, money laundering , and conspiracy.

And, in 2006 Enron Executives, Kenneth L. Lay and Jeffrey K. Skilling were convicted of fraud and conspiracy. [3] Lay passed away before sentnecing and Skilling was sentenced to 24 years in prison. [4] However, in 2013 Skilling had his prison sentence cut from 24 years to 14 in a deal with federal prosecutors after an appeals court ruled the original sentence was too harsh. The resentencing deal included that more than $40 million of Skilling's fortune would be distributed to victims of Enron's collapse. [5] Enron and the tobacco industry An October 1988 United Press article states that Enron planned to ban smoking from all of its downtown Houston offices effective January 1, 1990. This policy was quite restrictive for its time. [1] In March 2000, Enron gave a presentation titled "Total Energy Management Outsource Solution" to executives of the R.J. Reynolds (RJR) Tobacco Company. The presentation sought to convince RJR to outsource all of its energy supply and maintenance needs to Enron.

At the beginning of the presentation, to help make the sale, Enron states, "After extensive research and analysis we believe our two companies have similar corporate cultures..." [2] In a March 30, 2001 memo to Brendan McCormick of Philip Morris , the PR firm Apco Worldwide directed Philip Morris to look at the "Corporate Responsibility" section of Enron's Website as a model for how to pattern a similar section of PM's Website. [3] Enron and Wind Energy Enron bought Zond Wind Energy and around 1990 persuaded California to allow them to package the "environmental attributes" of wind turbines as commodities separate from the actual energy produced.[ citation needed ] They are now called "green tags" or "renewable energy certificates."[ citation needed ] In addition, Enron worked with Texas governor George W. Bush to ensure the continuation of a "production tax credit" for wind energy.

[6] After Enron's collapse, General Electric bought Enron's wind division.[ citation needed ] PR companies and people who worked for or on Enron accounts Diane Bazelides , Enron managing director of marketing and PR "Bankrupt Enron's HQ sold for $55m," BBC, December 3, 2003.

2004 "Enron finance chief pleads guilty," BBC, January 15, 2004: "Former Enron finance chief Andrew Fastow has pleaded guilty to fraud charges stemming from his role in the collapse of the scandal-hit firm." "Ex-Enron chief on fraud charges," BBC, February 19, 2004: "Former Enron boss Jeffrey Skilling has been charged with 35 counts of fraud, insider trading and lying about the state of the firm's finances." Vince Gonzales, "Enron Traders Caught On Tape," CBS News, June 1, 2004: "When a forest fire shut down a major transmission line into California, cutting power supplies and raising prices, Enron energy traders celebrated." "Enron bids to rise from the ashes," BBC, June 3, 2004: "Enron, the disgraced and bankrupt US energy trader, is presenting a rescue plan to a New York court, and could be reborn under a new name within weeks." Will the Enron crooks go to jail? NOTE: You've come to an old part of SW Online.

We're still moving this and other older stories into our new format. In the meanwhile, click here to go to the current home page. Will the Enron crooks go to jail? By Elizabeth Schulte | May 26, 2006 | Page 12 WILL ENRON'S top executives go to prison for presiding over massive corporate fraud? After four months of testimony, a jury began deliberating May 18 on federal fraud and conspiracy charges against Enron founder and former chair Ken Lay and ex-CEO Jeffrey Skilling. The case finally went to the jury more than four years after the Houston-based energy company's spectacular collapse in bankruptcy. Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors--which would land him a maximum sentence of 275 years in prison if convicted on all counts. Lay is up for six counts of fraud and conspiracy, with a possible combined maximum punishment of 45 years behind bars. Meanwhile, Lay was facing a separate trial on charges that he obtained $75 million in loans from three banks and reneged on an agreement not to use the money to buy stock.

Lay's signature appeared on forms promising that he wouldn't use credit on a loan to purchase stocks. In his defense, Lay's attorneys say that he wasn't responsible--because his assistants used an "auto-pen" to sign his name. The Enron bosses' corporate crimes took place in a system that is already rigged in their favor. As Lay's own lawyer pointed out, "Why are they trying to criminalize this? We might as well put every CEO in jail." Enron employees have already paid the price for Enron's fraud. "I was the one left holding the bag, but Lay and Skilling are able to get their day in court," said Debra Johnson, who worked at Enron from 1994 until it went bankrupt in 2001. Johnson told CNN, "I'm the one left with no insurance. I don't have anything. Nothing. Skilling and Lay don't know what it's like to go get food stamps and welfare while looking for employment full time. It's awful. Can I send my rent bills to Mr. Lay and Mr.

Skilling?" Several state workers' pension funds, including New York's, were tied up in Enron stocks--and when the company went down the tubes, so did state workers' retirement money. In their defense, Skilling's and Lay's lawyers claimed that their clients had been traumatized. Skilling is, in the words of his lawyer Daniel Petrocelli, a "tortured soul" because of "what happened to the business he built and what it will be known as." "Look into his soul," Petrocelli added in his closing arguments. "See if you see a criminal." Debra Johnson has done just that--and concluded, "I'd like to see them do hard time." Enron Fraud > History of Enron > The Enron Investigation updated October 6, 2015 It was one of the largest securities fraud scandals in history, and the investigation into the extent of the fraud committed by Enron is still ongoing. As a result, Enron was forced to file for bankruptcy in December 2001. History of Enron Enron is an energy company based in Houston, Texas that deals with the energy trade on an international and domestic basis.

It was formed in 1985 when Houston Natural Gas merged with InterNorth. After several years of international and domestic expansion involving complicated deals and contracts, Enron was billions of dollars into debt. All of this debt was concealed from shareholders through partnerships with other companies, fraudulent accounting, and illegal loans. Listed below are a few of the partnerships that allowed Enron to hide debt: RADR A group of entities secretly funded by Enron that purchased electricity-generating windmills from Enron, then later sold them back with some of the profits going to key Enron officials and their families. Chewco A company formed by executives of Enron in order to buy out the shares of California Public Employees’ Retirement System (CalPERS) in a joint venture investment partnership known as JEDI. Chewco bought out CalPERS interest in order to retain JEDI’s off-balance-sheet status. However, Chewco did not meet the requirements for accounting rules and claimed profits that it was not entitled to. In addition, when Enron bought out Chewco’s interest, Chewco’s price was driven up, reaping huge benefits for the original investors (Enron execs).

Southampton Enron bought the shares of National Westminster Bank (NatWest) in a limited partnership with Credit Suisse First Boston. Enron paid $20 million, but only $1 million went to NatWest. The remainder of the money went to several executives and their families, as well as to three NatWest employees who were in on the deal. Although top level executives at Enron were likely aware of the debt and the illegal practices, the fraud was not revealed to the public until October 2001 when Enron announced that the company was actually worth $1.2 billion less than previously reported. This prompted an investigation by the Securities and Exchange Commission , which has revealed many levels of deception and illegal practices committed by high-ranking Enron executives, investment banking partners, and the company’s accounting firm, Arthur Anderson. Investigation of Enron To date, the SEC has uncovered several instances of financial fraud committed by high-ranking executives at Enron. Many of the executives have been charged with wire fraud, money laundering, securities fraud, mail fraud, and conspiracy. The following is a list of key players who are suspected of fraud related to the Enron scandal: Kenneth Lay – former CEO and Chairman of Enron.

Andrew Fastow – former CFO of Enron. Fastow was indicted on 78 counts of securities fraud, money laundering, wire and mail fraud, as well as conspiracy to inflate Enron’s profit. Michael Kopper – former director in the global finance unit. Kopper pleaded guilty to financial wrongdoing in August 2002. Jeffrey Skilling – former CEO of Enron. J. Clifford Baxter – former Vice Chairman of Enron. Accused of securities fraud, Baxter died in an apparent suicide in January 2002. Arthur Anderson – the accounting firm that was responsible for auditing Enron. Arthur Anderson was found guilty of obstruction of justice for shredding documents related to the Enron scandal. Timothy Belden – former head of trading at Enron’s Portland, OR office. Belden pleaded guilty to one count of conspiracy to commit wire fraud related to Enron’s activities during the California power crisis. Gary Steven Emigre, Gilles Robert Hugh Darby, David John Birmingham – three former employees of NatWest (National Westminster Bank). These men have been charged with wire fraud that defrauded their employer but benefited themselves and executives at Enron.

Ex-Enron executive sentenced to 2 years in prison | Reuters Mon Jun 4, 2007 | 4:21 PM EDT Ex-Enron executive sentenced to 2 years in prison The former chief operating officer of Enron Corp.'s broadband Internet division, Kevin Hannon arrives at the Federal Building in Houston March 7, 2006. Hannon was sentenced to 2 years in federal prison for his role in the fraud that led to the giant energy company's collapse, a court official said on Monday. Reuters/Richard Carson HOUSTON The former chief operating officer of Enron Corp.'s broadband Internet division, Kevin Hannon, was sentenced to 2 years in federal prison for his role in the fraud that led to the giant energy company's collapse, a court official said on Monday. Hannon, 46, also received a $125,000 fine from U.S. District Judge Vanessa Gilmore in Houston, a clerk for the judge said.

Hannon, who was COO of Enron Broadband Services from January 2000 to June 2001, pleaded guilty in August 2004 to one count of conspiracy to commit wire and securities fraud and agreed to cooperate with prosecutors at the bankrupt company. The former Internet executive, who testified for the prosecution at the criminal trial of his former bosses Kenneth Lay and Jeffrey Skilling in March 2006, had faced up to five years in prison. At the time of his plea, Hannon also agreed to forfeit $2.2 million and pay $1 million to settle U.S. Securities and Exchange Commission civil charges. Hannon initially was indicted on charges of conspiracy, money laundering and insider trading, In March 2003, Hannon and six other managers were charged in a 221-count indictment of hiding poor results in the broadband unit, which was once touted as one of Enron's brightest prospects. Hannon's lawyer was not immediately available for comment on the sentence. Enron, once the seventh-largest U.S. company, collapsed into bankruptcy in December 2001 after its use of off-balance-sheet financing to prop up its results and hide massive debts was revealed.

Lay and Skilling were convicted in May 2006 for their roles in the fraud that triggered the collapse of Enron. Skilling is serving a 24-year sentence in prison in Minnesota. Lay died of a heart attack in July 2006 and never served time in prison. ADVERTISEMENT Enron | Business | The Guardian The Guardian Corporate governance Enron The man who founded Enron, Kenneth Lay, has died just weeks before his jail sentence was to be announced. Mark Tran and Stefanie Khaw look at one of America's biggest business scandals Close What is the latest development with Enron ? Kenneth Lay, the Enron founder, died of a "massive" heart attack on July 5 at his holiday home in Aspen, the exclusive Colorado ski resort. He was 64. In May, Lay was found guilty of six counts of fraud and conspiracy and was due to be sentenced in September. He expected to spend the rest of his life in prison. Lay is the second top Enron executive to die since the company collapsed. In 2002, Clifford Baxter was found dead after shooting himself in a Houston suburb. What took place at the trial?

The trial in January of Lay and Jeffrey Skilling, Enron's former chief executive, was one of the most eagerly anticipated in the corporate world. Both men denied 42 charges relating to their role in the accounting scandal. The former Enron finance director, Andy Fastow, testified against his former bosses in exchange for a maximum jail sentence of 10 years. The jury found Skilling and Lay guilty. What happened to Enron? The Texan energy company filed for bankruptcy in 2001 - at that time the biggest corporate collapse in US history. Named "America's most innovative company" by Fortune magazine for six years running, the firm unravelled after it was alleged that the concealment of huge debts had given investors a completely false image of the company. Enron went from being a company claiming assets worth almost £62bn to declaring bankruptcy within a period of three months. Share prices collapsed from about $95 to $1. Enron emerged from bankruptcy in 2004. Its current operations involve handling key assets and preparing the sale of its remaining businesses. What kind of company was it?

Enron started life as a regional natural gas pipeline company, the result of a merger between Houston Natural Gas and InterNorth in 1985. Lay was credited with transforming Enron into the world's largest energy trading company and America's seventh-biggest corporation. How did the corporation become so successful? Enron was quick to exploit opportunities when deregulation in the late 1980s allowed users to buy gas or electricity from different producers. It specialised in contracts to deliver natural gas, electric power and other energy products to industries and utilities at future dates. It also sold financial instruments designed to protect customers against sharp swings in energy prices. What was Wall Street's attitude towards Enron? Enron soon became a darling on Wall Street as analysts lauded the company for bringing hi-tech and complex finance to the dull business of supplying energy. Enron also cashed in on dotcom mania with Enrononline, a web-based trading service. When did the company start to unravel? The rot began in August 2001 with the abrupt resignation of Skilling, who cited "entirely personal reasons".

At the time, Lay denied there were any problems but Skilling's hasty exit set off alarm bells and Enron's shares started to drift downwards. What precipitated its collapse? The situation deteriorated dramatically in October 2001, when Enron had to set aside $35m (£24m) to reflect losses in two complex partnerships that had been set up in 1999 to conceal its large debt. Enron was also forced to knock $1.2bn off shareholder equity at the time, a move that sent its share price into freefall. Why did the collapse make waves politically? It emerged that Lay had conversations with Paul O'Neill, the treasury secretary, and Donald Evans, the commerce secretary, just weeks before the company filed for bankruptcy. Lay asked for help to stop a private credit rating agency downgrading Enron's debt. Officials deny any intervention but questions persist because of Enron's close connections with the Bush administration. How close was Enron to the Bush administration? Lay was an old friend of the president and Enron executives contributed more than $500,000 to George Bush's various campaigns.

More specifically, the White House faced questions about six meetings between Enron executives and the vice-president, Dick Cheney, or his staff that took place in 2001 when the Bush administration was formulating US energy policy. Did the firm's collapse lead to any changes? In July 2002, the president signed into law harsh penalties for anyone found guilty of corporate wrongdoing. Congress subsequently passed the Sarbanes-Oxley legislation, which tightened compliance for US companies. But that was small consolation for those who lost money through Enron. Investors lost their shirts and many of Enron's 19,000 employees lost their savings because they belonged to retirement plans based on Enron shares. Yet top executives were able to sell their Enron shares before they became worthless. How did Enron's finances escape scrutiny? Arthur Andersen, Enron's auditor, was convicted of obstructing justice by destroying a "significant" number of documents relating to the Enron case in June 2002. Once one of the "Big Five" accounting firms, the company voluntarily surrendered its licences to practise as a certified public accountant in the US in August 2002.

Andersen closed down in the US and agreed to pay $60m (£32m) to settle legal claims over its role in Enron's collapse. In May 2005, the US supreme court overturned the conviction, saying jury instructions had been "flawed", but Andersen is unlikely to return to business. Did Enron operate outside the US? By 1999, Enron was involved in a quarter of all electricity and natural gas deals in the world and had major operations in Brazil and India. Enron was particularly disliked in the developing world after the company became embroiled in one of India's biggest corruption scandals, in which large sums were paid to politicians involved in the privatisation of electricity firms. Did it have assets in the UK? Four thousand people worked for Enron or companies it owned in the UK. Enron owned Wessex Water, which employs 1,400 workers, and power stations on Teeside. Wessex Water was sold to the Malaysian utility YTL Power in May. The Enron jinx struck Wessex Water when its boss, Colin Skellett, was accused of accepting a £1m bribe during the sale.

He was cleared of the charges five months after being arrested by the police. How was Lord Wakeham involved? Lord Wakeham was the first British political victim of the Enron debacle. The former Conservative cabinet member stepped down as the chairman of the Press Complaints Commission "as a matter of honour" while his links to Enron were examined by US investigators. How was he linked to Enron? Lord Wakeham joined Enron as a non-executive director in 1994 after serving as energy minister under Lady Thatcher, when he approved Enron's purchase of a big gas power station in 1989. He also sat on Enron's audit and compliance committee, which was supposed to scrutinise the complex transactions between Enron and its controversial partnerships. The company paid him a reported £80,000 a year. USATODAY.com - Enron's legacy: Scandal marked turning point Enron's legacy: Scandal marked turning point By Edward Iwata, USA TODAY As Enron's former top executives face criminal trial in Houston Monday, the legacy of Enron — the most sensational corporate fraud scandal in recent history — still ripples through the business world.

The company remains a symbol of corporate greed and hubris and one of the costliest U.S. bankruptcy reorganizations ever. By Ron Edmonds, AP Kenneth Lay gives brief remarks before he refused to testify at a Senate hearing on Capitol Hill in 2002. Enron and other scandals spurred an unprecedented crackdown on corporate crime by prosecutors and regulators, who have nailed hundreds of defendants with fraud and other charges and hundreds of millions of dollars in penalties. The scandals compelled Congress in 2002 to pass the Sarbanes-Oxley Act, the most sweeping anti-fraud legislation ever, and companies are paying auditors and attorneys billions of dollars in fees to keep pace with the new rules. Among other key changes in corporate governance, company boards must disclose their auditing controls and hire more directors with auditing expertise. The scandals shook investors' confidence and made it harder for companies to raise capital, says accounting professor Burch Kealey at the University of Nebraska-Omaha. Publicly traded companies lost $7 trillion in stock market value from 2000 through 2002 — much of it because of the corporate scandals and the Sept. 11 attacks, say analysts, economists and scholars.

"Enron was a watershed event" that questioned "the integrity of the market and the accuracy of financial information," says Cynthia Richson, corporate governance officer at the Ohio Public Employees Retirement System pension fund, which lost $300 million from the corporate scandals. Moreover, Enron is the biggest Chapter 11 bankruptcy in U.S. history in court-awarded fees, racking up $780 million, says UCLA law professor Lynn LoPucki. If professional fees and services not awarded by the court are added, the total surpasses $1 billion, he says. The trial of former Enron chairman Ken Lay and former CEO Jeff Skilling will bring to a climax much of the Enron saga. They go to trial today for their alleged roles in the massive fraud that became public in 2001. But even after the trial, Enron's impact will be felt in: •Lawsuits. A shareholders' class-action lawsuit against Enron, 10 Wall Street investment banks and law firm Vinson & Elkins continues to wind through court. By Dennis Cook, AP Jeffrey Skilling testifies before the House Commerce oversight and investigations subcommittee in 2002.

Investors suffered $50 billion in total losses, says shareholders' attorney Bill Lerach, but securities laws allow them to collect only a portion of that. So far, lead plaintiff University of California and other investors have settled for $7.1 billion with Citigroup, JPMorgan Chase and CIBC. "Not much that came out of Enron was hopeful," Lerach says. "But at least when these frauds occur, we're able to remedy them." Meanwhile, 20,000 former employees and retirees in Enron's pension and 401(k) retirement plans that held Enron stock suffered $1 billion in losses, says Britt Tinglum, their Seattle attorney. The former employees have agreed to four settlements totaling $482 million with Arthur Andersen and Enron. The only remaining defendants are Lay, Skilling and Northern Trust, trustee of Enron's 401(k) retirement plan. A trial is set for October in Houston. "There was an incredible breach of trust that's going to take some time to heal," Tinglum says. •The regulatory and corporate-governance arena.

Public outrage over Enron forced Congress to pass Sarbanes-Oxley, the biggest changes in securities law since the Great Depression of the 1930s, when the Securities and Exchange Commission was created. Known as "Sarbox," Sarbanes-Oxley requires executives to certify their company finances, set up audits of internal accounting controls and disclose those controls to the SEC. Sarbanes-Oxley also created the Public Company Accounting Oversight Board, which oversees audit practices. Stock exchanges have adopted tougher listing requirements for companies. The New York Stock Exchange and Nasdaq, for instance, now require that a majority of directors be independent. Thousands of companies also have adopted tougher governance policies, such as adding independent directors who are less likely to ignore wrongdoing by corporate officers. According to the National Association of Corporate Directors, companies with a majority of independent directors on their boards grew to 89% in 2005 from 61% in 2001. "There's been a sea change in our focus on corporate ethics," says Steve Odland, Office Depot CEO and former corporate-governance chair of the Business Roundtable industry group.

"We've made more progress in the last three years than the previous 30." Large investors — the public, corporate and union pension funds that invest trillions of dollars in retirement assets — also have stepped up their watchdog duties. Shareholders' advocates argue that governance rules still are too weak, and executives remain tempted to engage in questionable accounting to meet Wall Street's earnings forecasts. Last year, for example, former SEC chairman William Donaldson failed to win enough votes from SEC commissioners on a rule that would have given shareholders more influence in directors' elections. Nor did stiffer laws stop last fall's scandal at commodities broker Refco, where former CEO Phillip Bennetthas been charged with accounting fraud. By one measure, though, the new rules appear to be working. In 2005, shareholders' lawsuits alleging accounting fraud fell 17% to 176 filings from 213 the year before, according to Stanford University law professor Joseph Grundfest and Cornerstone Research. Some corporate boards also seem to be more alert to potential wrongdoing. During a large financial scandal last year at American International Group, directors for the insurance firm tossed longtime chairman Maurice Greenberg.

The scandals "raised the floor for what is expected of companies and boards in their governance performance," says Ann Yerger, head of the Council of Institutional Investors, which represents 140 pension funds with $3 trillion in assets. •The corporate world. U.S. companies have shelled out hundreds of millions of dollars to comply with post-Enron rules, which some executives have slammed as an overreaction to the scandals. In a survey of 648 large U.S. companies, accounting professors Kealey and Susan Eldridge at the University of Nebraska-Omaha found that the corporations spent an average of $2.3 million more on audit fees in 2004 than in 2003. Businesses fear that costs of the anti-fraud rules will especially hurt small and midsize firms. "The money helps to restore trust and faith in our system," Odland says. "But we don't want the pendulum to swing too far and stifle innovation." •The energy-trading business. In the late 1990s, Enron and other energy traders were hailed as the high-tech future of the power industry.

But after Enron collapsed, dozens of industry traders were charged with fraud, firms shed their trading units and the industry saw $90 billion in debt reduced to "junk" status. In California, Enron traders were accused of worsening the state's power crisis in 2000 and 2001, when the state suffered blackouts and leaps in energy prices. The Federal Energy Regulatory Commission recently issued rules that ban manipulation of the wholesale gas and electricity market. FERC also oversaw $6.3 billion in settlements between California, Enron and other energy firms accused of market manipulation. Some think that's not enough, arguing that FERC rules and state laws must be stronger to stamp out fraudulent energy trading. "People are more circumspect because of the criminal convictions, but we've had very few substantive reforms," says Robert McCullough of energy consulting firm McCullough Research. Beyond the fraud, others praise Enron for revolutionizing the online and electronic trading of fuel contracts. The trading helps the power industry hedge financial risks and stabilize future fuel supplies. "A lot of practices that flowed out of that company benefit the energy sector and the general economy," says Michelle Michot Foss, chief energy economist at the University of Texas at Austin.

In the end, Enron's legacy likely will be judged by the toughest question to assess: whether the stronger rules will wipe out wrongdoing in the corporate landscape. The new rules "make future Enrons a little less likely to occur," says Charles Elson, a corporate-governance expert at the University of Delaware. "Sometimes it takes a disaster to create reform." Reform only goes so far, though. Says attorney Lerach: "If everybody was pure of heart, we'd be all right. But you're always going to have fraud in the markets." Some Major U.S. Companies That Went Bankrupt - DirJournal Blogs Some Major U.S. Companies That Went Bankrupt written by Hasan October 25, 2008 image bigstockphoto.com Even in the business world, what goes up sometimes comes down, and if the company is big, the sound of the fall is louder and clearer. Chapter 11 bankruptcies in the United States have been many. Chapter 11 allows a company to reorganize by allowing the debtor to keep a part or all of their property, as well as allows the company to pay off creditors with future earnings.

Washington Mutual – September 26, 2008 The present financial crisis has hit the US harder than Hurricane Katrina, and WaMu bankruptcy only reiterates this. US reeled under the news of the biggest bank failure in its history, as federal regulators seized the largest American savings and loan institution, Washington Mutual (WaMu), which came to symbolize the excesses of the mortgage boom. Regulators brokered an emergency sale of the assets to JPMorgan Chase for $1.9 bn. As expected, global markets plunged. WaMu’s assets were $307 bn and it was also the sixth largest US bank, behind Bank of America. With this acquisition, JPMorgan will now have about $900 bn in deposits. Lehman Brothers Holdings Inc. – September 15, 2008 A press release on September 15, 2008 by Lehman Brothers Holdings Inc. (LBHI), the 158-year-old U.S. investment bank, altered the American financial landscape. The company announced its intent to file for bankruptcy.

This is the largest bankruptcy in the history of the United States with $638 billion in assets listed and the largest failure of an investment bank. The bank has been undermined by bad debts and shares tumbled 94% this year, before it was delisted on September 17, 2008. The deal for Barclays Plc to acquire the main business of Lehman has been approved. Barclays would also absorb $47.4 billion in securities and $45.5 billion in trading liabilities. Refco Inc. – October 17, 2005 Refco Inc. filing was then one of the major bankruptcies in the United States. New York-based Refco was a diversified financial services organization that was primarily a commodities and futures broker, with operations in 14 countries. Founded in 1969, this firm was the largest broker on the Chicago Mercantile Exchange, with more than $4 billion in customer accounts. The firm’s collapse came about ten weeks after it sold shares for the first time to the public.

The company was under investigation for hiding a $430 million debt and the Chief Executive Officer and Chairman; Phillip Bennett pleaded guilty of fraud and sentenced to 16 years. Delta Airlines Inc. – September 14, 2005 This United States airline is based in Atlanta, Georgia and operates extensive international and domestic flights. The company has been facing financial difficulties for a long time and ever since 2004, tried to stave off bankruptcy by restructuring the company with job cuts and expansion plans. However, in September 2005, it filed for bankruptcy for the first time in its 76-year history. The company cited high jet fuel prices and high labor costs as the two main factors. Delta was in $20.5 billion debt at the time of filing. On April 30, 2007, the airlines emerged from bankruptcy protection as an independent carrier. Conseco Inc. – December 18, 2002 This is an epic case of a stock-slide leading to bankruptcy and then an amazing recovery. Conseco Inc., an insurance, investment and lending company in Carmel, files for bankruptcy.

But it did so after reaching a pact with major creditors to restructure its debt. With the bankruptcy Judge approving a plan cutting the company’s debt from $7 billion to $1.4 billion, the company emerged from being the third-largest bankruptcy in U.S. history and paved the path to financial recovery. Conseco Inc. was once a high-flying company that rose to Fortune 500 status through several insurance acquisitions. Too many buyouts sent the company into a severe tailspin. UAL Corp. – December 9, 2002 UAL Corporation is an airline holding company based in Illinois. It was incorporated as a Delaware corporation. To keep up with the deregulated airline market place, the company tried diversifying its businesses in 1982, in order to improve its financial situation. In spite of its efforts, like other airlines, it struggled with rising fuel prices and shaky finance, and filed for bankruptcy. However, it emerged from bankruptcy in 2006. WorldCom Inc. – July 21, 2002 WorldCom bankruptcy came about a month after the company revealed that it had wrongly accounted almost $4 billion in expenses.

It was the largest US-based telecommunications company with more than 20 million customers and 80,000 employees. At that time, WorldCom was one of the world’s most valuable companies, valued over $100 billion, and the bankruptcy was considered the largest in United States history. WorldCom also came to be famous as one of the biggest instances of a corporate feeding its greed through accounting and financial manipulations. Global Crossing Ltd. – January 28, 2002 The result of this bankruptcy was said to be the loss of 9000 jobs. Global Crossing is an American telecommunications company based in Bermuda, providing computer networking services throughout the world. In its filing, the company listed its total assets of $22.4 billion and debts amounting to $12.4 billion. It has since recovered from bankruptcy and succeeded in turning around its performance. Enron Corp. – February 12, 2001 Enron Corp. bankruptcy was the biggest corporate bankruptcy in U.S. history, and left investors burned and employees with lost retirement savings. It was an energy company in the United States, formed in 1985, in Houston, Texas.

It grew to be the nation’s seventh-largest company in terms of revenue by buying electricity from generators and selling it to customers. Wall Street also called it the technological innovator. The reason for its downfall is said to be the complex partnerships to keep about $500 million in debt off of the books in order to mask its financial problems, to continue to get credit and cash for running its trading business. Once the loss of $638 million was disclosed, the Securities and Exchange Commission opened an investigation. Enron then filed for protection from creditors. Pacific Gas & Electric Co. – April 6, 2001 This company, with its headquarters in San Francisco, was founded in 1905 and supplies natural gas and electricity to most areas of Northern California. This company did well initially and had gas power, several hydroelectric and steam plants. Under the electricity market deregulation, the company sold off its natural gas power plants and retained the hydroelectric plants. But with the selling of the gas power plants, the generating capacity went down and it had to buy power from other energy generators. The company had to buy at fluctuating prices and sell at fixed prices, which led to losses and eventually bankruptcy.

In 2004, the company emerged from bankruptcy and established itself extremely well and was named one of the most profitable companies for 2005 on the Fortune 500 list. Bankruptcy cases are always filed in the United States Bankruptcy Court and are governed by federal law. State laws are also applied when it comes to property rights. There have been several other notable bankruptcies in American history, such as Texaco, Inc. and Financial Corp. of America. While some companies survived a bankruptcy and came out strong, others faded into oblivion. Some Major U.S. Companies That Went Bankrupt was last modified: June 15th, 2016 by Hasan

Question: What Houston energy company went bankrupt in 2001 after massive fraud was revealed?
Answer: Enron