Jeffrey Cruthers

Mr. McConnel

Writing Assignment 2

July 31,2022

In the year 2001 Enron became one of the biggest scandals that has every occurred in this

country. Enron for many years was committing fraud and laundering money until the early 2000’s

when the government finally found out what was going on in the company. Enron’s chair and CEO

and many other people were lying to investors about how well Enron was doing and their future

profits. They were doing this by a special accounting technique called “Mark to Market”

accounting. This allowed them to fly under the radar for so long by being able to report any

predicted number they wanted that would say this is how much we will make this year no matter

how little money came in the door that day. These unethical tactics would get investors to invest

and sign long term contracts for huge sums of money to Enron that they would eventually steal

and put in their pockets.

The Enron scandal did not begin in the gas and electric industry. It began in the movie

industry. They linked up with blockbuster at this time for something that was brand new at the

time “Video on Demand” or live streaming movies. Enron overstated these predictions of the

future profits that they will make using the “Mark to Market” accounting and made a deal that

looked irresistible that Blockbuster could not pass up. Unfortunately, this would be their downfall

and in the end the closings of their stores. Other than Blockbuster Enron was doing the same

thing with many investors and using the same accounting method to falsify future earnings to
retain their money from long term contracts. The expert mind behind this was the CEO of Enron

by the name of Jeffrey Skilling along with the Chairman Kenneth Lay, and CFO Andrew Fastow.

In February 2001 Jeffrey Skilling to the position of CEO of Enron but he resigned shortly

after in August saying it was due to personal reasons. Many of the top officials of the company

that were in on the scandal start dumping their stocks or selling them because they knew there

were worthless. As these few people were making millions and millions of dollars there were

thousands of employees who lost everything. Most of Enron employees had their retirement,

investments, and life savings into Enron seeing that the false reports that were given to the

people to make an accurate decision was wrong. All of Enron’s employees lost everything that

had worked for throughout the years.

Many of the top ranked officials were charged and convicted with many charges

stemming from wire fraud, money laundering, securities fraud, mail fraud, and conspiracy. The

ringleader Jeffrey Skilling was convicted of fraud and conspiracy in 2006 which he received a 14-

year sentence but only did twelve years of that. The chair Kenneth Lay was convicted on six

counts of securities and wire fraud. He was facing forty-five years in prison, but he died during the

trail process. Also, Andrew Fastow the accountant that produced the mark to market accounting

technique was convicted of felony charges of fraud and conspiracy and was sentenced to six

years in prison. Even though all these men were convicted they still walked away with millions of

dollars they stole form the company after they were released from prison.

In the aftermath of the Enron scandal there were new laws and regulations that were put

into place to help prevent this from happening again. The most known law to help accurately
increase the financial reports to the public and trading companies is known as “The Sarbanes-

Oxley Act (2002)”. This act. set new standards for accountings firms and corporate boards and

their directors. Under this act they were trying to gain back the trust of the shareholders and

protect them and the employees of these corporations from this happening to anyone again. In

the end many of Enron’s top officials made hundreds of millions and the everyday shareholders

who invested in them lost a total of seventy-four billion dollars.