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Introduction
In 2001, the nation was rocked by the collapse of Enron, a multibillion dollar
corporation that employed thousands of people and had affiliations right up to
and including The White House itself.
Amid the financial chaos and destroyed lives and reputations the collapse left in
its wake, questions arose concerning exactly how the catastrophe occurred, why it
occurred, and who was involved. In this paper, these issues will be examined, as
will the various ways that Enron’s debacle heightened the awareness of corporate
ethics in the United States.
With all of the fraud and mismanagement that took place under the gilded roof of
Enron, the question arises as to the involvement of others in the scandal, not the
least of whom is the firm of Arthur Andersen.
Arthur Andersen’s Involvement
No discussion of the Enron Scandal would be complete without a discussion of
the involvement of Enron’s accountants, the firm Arthur Andersen, in the scandal
itself as well as the subsequent crash of the company from the inside out. In
asking officials of Andersen if they were guilty of any wrongdoing in the scandal,
they maintain that the crash and burn of Enron was the direct result of Enron’s
faulty business model rather than questionable or poor accounting practices
(Cable News Network, 2002). A closer examination of the facts reveals otherwise;
when the Enron scandal was investigated by auditors and law enforcement
agencies, it was found that Andersen was negligent at best and at worst
completely in conspiracy with Enron to create false earnings reports, thereby
hiding huge amounts of debt and artificially inflating stock prices beyond the
point of no return (Cable News Network, 2002). Among the ultimate findings of
the investigation into Andersen’s role in the whole conspiracy, it was determined
that the firm had either directed or personally shredded thousands of documents
that showed the true extent of Enron’s financial problems. With these documents
out of the way, the fraud was able to continue, and in this instance, Andersen’s
involvement in the fraud was firmly established. Ultimately, the conspiracy led to
a total scrutiny of the American accounting system itself.
The above quote and accompanying statistics speak volumes about the extent and
impact of government involvement in Enron’s shady dealings, but a much clearer
vision of the impact of Enron’s crimes is gained with this same government
report is quoted once again, in this instance in terms of citation of what occurred
in the outside world when Enron was at its criminal worst:
In the Dominican Republic, eight people were killed when police were brought in
to quell riots after blackouts lasting up to 20 hours followed a power price hike
that Enron and other private firms initiated. The local population was further
enraged by allegations that a local affiliate of Arthur Andersen had undervalued
the newly privatized utility by almost $1 billion, reaping enormous profits for
Enron.
In India, police hired by the power consortium of which Enron was a part beat
non-violent protesters who challenged the $30 billion agreement-the largest deal
in Indian history-struck between local politicians and Enron.
The president of Guatemala tried to dissolve the Congress and declare martial
law after rioting ensued, following a price hike that the government deemed
necessary after selling the power sector to Enron.
In Panama, the man who negotiated the asking price for Enron's stake in power
production was the brother-in-law of the head of the country's state-owned
power company. Rioting followed suspicions of corruption and Enron's price
hikes and power outages there, too.
In Colombia, two politicians resigned amid accusations that one was trying to
push a cut-rate deal for Enron on the state-owned power company.
Enron, with the help of government resources, was able to wreak a great deal of
havoc in an incredibly short period of time; this havoc, as can be clearly seen, was
not limited to the United States either, but extended to other nations and
continents. The lives that this affected must surely number in the millions. Along
with these total strangers, Enron also had a negative impact, to say the least, on
its very own employees- the people who helped to make the company as strong as
it was in the first place-right or wrong.
Ethically speaking, the scandal led to what is perhaps one of the most significant
pieces of legislation associated with the oversight of corporate ethics- The
Sarbanes/Oxley Act which sets guidelines and requirements for Accounting,
financial disclosure, the ethical behavior of corporations, and the like (McCrie,
2001). With this legislation in place, the promise exists for the elimination, if not
total eradication of corporate fraud was so blatantly practiced by the Enron team.
The Scandal’s Influence on the Stock Market
The Stock Market was also highly influenced by the Enron scandal; while it was
too late for the Enron investors, the crash of Enron’s stock sent out a loud
message to all stock investors that it was extremely important to take a closer
look at the stocks that one already owned, as well as any that they were
considering purchasing from that point forward. On the enforcement side of the
Stock Market, the Securities and Exchange Commission tightened its grip on
publicly traded stocks as well as the companies that issue them, effectively raising
the bar for the conduct of stock trades from that point forward (Thomas, 2002).
Net effect, it can be said that in yet another irony, Enron did in fact lead to the
protection of more stock investors than it originally hurt, although those who
were hurt can never be made totally whole once again after the terrible
experiences of Enron.
Summary
Having the luxury of looking at the Enron scandal from the retrospective
viewpoint of history, the scandal changed the lives of everyone in America, and
elsewhere, in one way or another, for better or for worse. Perhaps just as
importantly, it forced everyone to look at themselves and fully realize the
consequences of reckless greed and the breakage of laws on a whim. In closing,
let it be understood that it is the responsibility of every American to be vigilant,
lest another Enron emerge from the shadows to claim yet more victims in the
future.