Enron
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ENRON
Enron began operating in 1985, as a company which shipped natural gas through pipelines, over time the company became a major force within the sector in which it operated and became known for its dominance among energy traders. With increased growth in size, power and prestige the companys contracts and operations became questionable which led to increased scrutiny. It was alleged that there were illegal transactions and partnerships which covered a growing debt problem within the company.
The executives of Enron were able to keep this situation hidden from the stakeholders for a long time, when the situation became public knowledge; it was too late to avert the crisis which later developed. It has been stated that the CEO of the company was warned by an executive of the company, of impending financial problems which were based on accounting irregularities. In 2001 it was discovered that the company was worth $1.2 billion less than was previously reported, this difference was the result of inflated estimates of income and the under reporting of debts. This situation resulted in the company filing for bankruptcy.
Enrons case became the subject of many debates and much controversy over time. Many people lost their investments and their jobs when the company filed for bankruptcy in 2002. As the investigations deepened, several top executives were charged with fraud, which included securities, wire and mail fraud. There were also allegations of money laundering and conspiracy; investigators were interested in gaining information on the secret dealings which led to the fall of the company.
The investigations revealed that Enron had a group of partnerships called LJM which was a major part of the companys problems. LJM was funded by money from investors, bankers as well as with the companys stock. This partnership engaged in risky deals and allowed the company to conceal its debts and liabilities. The executives of the company also secretly formed a company called Chewco, which was subsequently sold to Enron for an inflated price; one of the executives was also paid a high management fee which was shared with the chief financial officer.
The outcome of this situation was that a number of Enrons top executives were charged and convicted with fraud. Investigations uncovered elaborate schemes which were used by the