Abstract
On March 15, 2005 former CEO of WorldCom, Bernard Ebbers sat in a federal courtroom waiting for the verdict. As the former CEO of WorldCom, Ebbers was accused of being personally responsible for the financial destruction of the communications giant. An internal investigation had uncovered $11 billion dollars in fraudulent accounting practices. Later a second report in 2003 found that during Ebber’s 2001 tenure as CEO, the company had over-reported earnings and understated expenses by an astonishing $74.5 billion dollars (Martin, 2005, para 3). This report included the mismanagement of funds, unethical lending practices among its top executives, and false bookkeeping which led to loss of tens of thousands of its employees.
On March 15, 2005 Bernard Ebbers sat in a federal courtroom waiting for the verdict. As the former CEO of WorldCom, Ebbers was accused of being personally responsible for the financial destruction of the communications giant. In July 2002, an internal investigation had uncovered $11 billion dollars in fraudulent accounting practices. A second report in 2003 found that during Ebber’s 2001 tenure as CEO, the company had over-reported earnings an understated expenses by an astonishing $74.5 billion dollars (Martin, 2005, para 3). This report included the mismanagement of funds, unethical lending practices among its top executives, and false bookkeeping which led to loss of tens of thousands of its employees. They also uncovered a series of clever manipulations intended to bury almost 4 billion in misallocated expenses and phony accounting entries (Moberg &, Romar, 2002, section 5, para 1). Hoping too sway the jury with an “ignorance is bliss” defense, he braced for the verdict. In hi...
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Just like people, corporations have the capability of committing criminal acts. The Enron scandal in 2001; the Bernard Madoff ponzi-scheme of 2008-2009; both of these examples show that despite internal and external controls, regulations, and oversight, corporations still are a multi-faceted entity that have the propensity to partake in crime. That being true, that criminal entity must be punished and held responsible for their actions. One tool in the prosecutorial tool belt is the use of deferred prosecution and non-prosecution agreements. According to Lanny Breuer, the United States Department of Justice’s Criminal Division, “over the last decade, deferred prosecution agreements have become a mainstay of white collar criminal law enforcement” (Warin, 2012).
Corporate executives like Kenneth Lay and Martha Stewart were taken before the court for poor ethical practices. Leaders of pharmaceutical companies have been found knowing about distribution of unsafe products. Leaders at Coke Cola were found guilty of racial discrimination and leaders of cruise ships fined for dumping waste in the ocean. News reports exposed Wall Street analysts who created phony reports, made profits, and pushing worthless stocks, left citizens questioning if they should invest their money. Leaders of the world’s largest retailer, Wal-Mart, were cited for practices of employee abuses and gender discrimination.
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
"This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.
Unethical accounting practices involving Enron date back to 1987. Enron’s use of creative accounting involved moving profits from one period to another to manipulate earnings. Anderson, Enron’s auditor, investigated and reported these unusual transactions to Enron’s audit committee, but failed to discuss the illegality of the acts (Girioux, 2008). Enron decided the act was immaterial and Anderson went along with their decision. At this point, the auditor’s should have reevaluated their risk assessment of Enron’s internal controls in light of how this matter was handled and the risks Enron was willing to take The history of unethical accounting practic...
Enron’s ride as a company was truly a ride of broken dreams. From being one of the top regional gas pipeline traders, to the nation 's 7th largest corporation, to the world’s largest energy trader; and in a matter of 24 days they fell down into a hole of bankruptcy and dishonor. What took Enron 16-years to grow from $10 billion of assets to $65 billion was all gone in a matter of days. While Enron’s story is one of numbers and transactions it is also a story of human tragedy, a story of major misconduct within a top corporation. As shown in the documentary, Enron: The Smartest Guys in the Room, Enron became one of the worlds most acclaimed business ethics case of the century. The documentary explored the good, the bad, and the terrible of a company that was once #1.
Enron was a company founded in the year 1985 based in Houston, USA. It was one of the world's largest energy trading and Distribution Company having an income of nearly hundred billion dollars during 2000 and was also regarded as America’s most Innovative companies for 6 consecutive years by the fortune magazine. In the last quarter of 2001, it was exposed that it’s declared financial condition was maintained significantly by systematized and skillfully premeditated accounting fraud, known thereafter as the Enron scandal. They hid major debts and did not book them in the balance sheet. The inflated figures in their balance sheet shot up their stock price to unprecedented levels, taking advantage of the situation executives with insider information traded in millions of dollars of Enron stocks. The senior executives and insiders were aware of the offshore accounts that were covering up losses for the Organization; the investors were kept in the dark. This sent across a domino effect which resulted in shareholders losing seventy four billion dollars, loss of hundreds of jobs and thousands of investors and employees losing their retirement accounts.
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The Enron Corporation was an American energy company that provided natural gas, electricity, and communications to its customers both wholesale and retail globally and in the northwestern United States (Ferrell, et al, 2013). Top executives, prestigious law firms, trusted accounting firms, the largest banks in the finance industry, the board of directors, and other high powered people, all played a part in the biggest most popular scandal that shook the faith of the American people in big business and the stock market with the demise of one of the top Fortune 500 companies that made billions of dollars through illegal and unethical gains (Ferrell, et al, 2013). Many shareholders, employees, and investors lost their entire life savings, investments,
In the 1990’s after the United States Congress approved legislation that deregulated the sale of natural gas, Enron was able to sell energy at much higher prices and to gain higher revenues. This is when Enron’s engagement in criminal activity is considered to have begun. While most companies’ activities regarding commercial business are regulated and watched over by the government, deregulated companies “are not subject to government mandating and oversight; as a result, the executives of ENRON were able to misrepresent their respective earnings reports and stock activity in a fraudulent manner” (Finance Law) by misrepresenting their earnings therefore falsely inflating the prices of their sto...
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
The Enron case is very intriguing case of corporate corruption and greed. As we review some of the company’s facts and history along with other areas of the corporation, we can see that this case is filled with great examples of business ethics put to the
The Tyco accounting scandal is an ideal illustration of how individuals who hold key positions in an organization are able to manipulate accounting practices and financial reports for personal gain. The few key individuals involved in the Tyco Scandal (CEO Kozlowski and CFO Swartz), used a number of clever and unique tactics in order to accomplish what they did; including spring loading, manipulating their ‘key-employee loan’ program, and multiple ‘hush money’ payouts.