The Enron Scandal.

Table of Contents

• Persons Involved
• Timeline
• Problems
• Analysis

Table of Contents

• Responsibility of Auditors
• Prevention
• Impacts
• The Blame

IDENTITIES.

EXECUTIVES

CEO, President, CFO, CEO (EES)

BANKS

LAWYERS & Auditors

Wall Street.

Timeline

Timeline I

• July 1985 - Merger: Houston Natural Gas and InterNorth
• January 1987- Discovery of oil trader misappropration
• April 1987 - Valhalla Operation scam
• 1987 - Enron starts oil trading
• Jan 30, 1992 - SEC approves mark-to-market accounting

Timeline II

• Dec. 10th, 1996 - Jeff Skilling as COO
• Nov. 24th, 1997 - Andrew Fastow becomes CFO
• May 24th, 1999 - Exploitation of Cali.
• June 28th, 1999 - Exemption of Fastow - Private Equity Fund: LJM1
• Sept. 16th, 1999 - Fastow approaches Merril Lynch for LJM2

Timeline III

• October 12th, 1999 - Exempts Fastow for LJM2
• August, 2000 - Stock prices at an all-time high of $90.56
• February 2001 - Skilling becomes CEO (Lay as chairman)
• August 14, 2001 - Skilling resigns as CEO (Lay retakes position)

Timeline IV

• August 15, 2001 - Sherron Watkins sends concerned letter
• September 21, 2001 - "Preliminary" investigation reports no issues
• October 22, 2001 - SEC announced to investigate
• October 23, 2001 - Arthur Anderson shreds documents
• November 8, 2001 - Enron restates net income from 1997-2001

Timeline V

• November 28, 2001 - Lowered credit ratings, stocks "junk" status
• December 2, 2001 - Enron files for bankruptcy
• December 21, 2001 - Lay presents reorganization plan
• January 23, 2002 - Lay resigns as CEO and Chairman
• February 2, 2002 - Powers Report is published

Problems and Analysis

Special Purpose Entities (SPEs)

Hypothetical Future Value Accounting

Impacts

Employees

Shareholders

Auditors

JPMorgan Stanley
Citibank

Charges and Convictions

The Sarbanes-Oxley Act (2002)

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