FINANCIAL SCANDALS ENRON

ACCOUNTING STUDY CASE

Gr. 128 APOSTOL TEODORA BABICI RUXANDRA DANCIU ALEXANDRA SAMARA MARIA CORINA

1. Cause of the scandal.

To understand o! t "s s#anda$ a%%eared !e &ust '"rst see ! o Enron rea$$( !as. So Enron Cor%orat"on !as a trad"n) and ener)( #o&%an( *ased "n +ouston, Te-as t at e&%$o(ed around 21,... %eo%$e *( &"d/2..1, *e'ore "t !ent *an0ru%t. Enron !as one o' t e !or$d1s $ead"n) e$e#tr"#"t(, natura$ )as and #o&&un"#at"ons #o&%an"es. T e #o&%an(, !"t re2enues o' 31.1 *"$$"on "n 2..., &ar0eted e$e#tr"#"t( and natura$ )as, de$"2ered % (s"#a$ #o&&od"t"es and '"nan#"a$ and r"s0 &ana)e&ent ser2"#es to #usto&ers around t e !or$d, and de2e$o%ed an "nte$$")ent net!or0 %$at'or& to 'a#"$"tate on$"ne *us"ness. 4ortune &a)a5"ne na&ed Enron 6A&er"#a1s Most Inno2at"2e Co&%an(7 'or s"#onse#ut"2e (ears. Enron1s Internet address !as !!!.enron.#o&. T e sto#0 !as traded under t e t"#0er s(&*o$ 6ENE7. T e reason 'or Enron1s '"nan#"a$ s#anda$ #an *e tra#ed to "ts a##ount"n) &et ods. T e 'a$$ o' Enron started !"t t e 'a#t t at Enron8s 'a$se a##ount"n) !as not s%otted sooner and "t as %ro&%ted t e a##ount"n) "ndustr( to ta0e a ard $oo0 at "tse$'. +undreds o' US '"r&s ! "# used so/#a$$ed a))ress"2e a##ount"n) &et ods to 0ee% de*ts or one/o'' # ar)es a!a( 'ro& t e ead$"ne '")ures a2e *een a''e#ted. So to understand ! ere t e %ro*$e& o##urred !e &ust '"rst understand ! at a))ress"2e a##ount"n) rea$$( "s. T e on/$"ne '"nan#"a$ d"#t"onar( de'"nes a))ress"2e a##ount"n) as t e %ra#t"#e o' "na%%ro%r"ate$( &"s#onstru"n) "n#o&e state&ents 'or t e %ur%ose o' %$eas"n) "n2estors and "n'$at"n) sto#0 %r"#es. T "s #an *e done *( "d"n) $osses !"t "n su*s"d"ar( #o&%an"es, not #a%"ta$"5"n) e-%enses, and a##ount"n) re2enues are on$( so&e o' t e e-a&%$es o' 9#oo0"n) t e *oo0s.9 A))ress"2e a##ount"n) as *een "n t e re#ent s%ot$") t as #o&%an"es are *e"n) #au) t atte&%t"n) to "n#rease re2enue "na%%ro%r"ate$(. But o! #ou$d t "s 'raud #ou$d *e done e-#e%t !"t t e e$% o' an a##ount"n) '"r&. T "s '"r& !as Art ur Andersen ! "# &"sre%resented t e #o&%an(8s '"nan#es *( esta*$"s "n) #o&%$"#ated %artners "% arran)e&ents ! "# a*sor*ed s")n"'"#ant a&ount o' t e #o&%an(8s de*t. As a resu$t, sto#0 %ur# asers !ere $ed to *e$"e2e t at Enron8s resour#es !ere 'ar )reater t an t e( !ere. T e $osses #$a"&ed so 'ar *( %u*$"# %ens"on 'unds are a%%roa# "n) 32 *"$$"on. A$so 2"#t"&"5ed !ere ran0 and '"$e Enron e&%$o(ees ! ose ret"re&ent 'unds !ere rendered !ort $ess. So&e o' t ese e&%$o(ees ad $on) #areers !"t ut"$"t"es ! "# ad re#ent$( *een %ur# ased *( Enron. T "s s#anda$ a$so as a %o$"t"#a$ *a#0)round due to t e 'a#t t at "n e-# an)e 'or #ontr"*ut"ons 'or t e %o$"t"#a$ #a&%a")ns t e $a!&a0ers &ade #erta"n 'a#"$"tat"ons "n d"''erent areas o' t e #o&%an(1s "nterest. So !e a2e Enron %ro2"d"n) &"$$"ons o' do$$ars to '"nan#e Mr Bus 8s 2... e$e#t"on #a&%a")n. Mr Bus ! o !as a %ersona$ 'r"end o' Mr La(, t e %res"dent o' ENRON, as *een :u"#0 to d"stan#e "&se$' 'ro& an( "n2o$2e&ent !"t t e '"r&. It as a$so e&er)ed t at Mr La( #a$$ed t!o US #a*"net o''"#ers *e'ore t e #o&%an( '"$ed 'or *an0ru%t#( $ate $ast (ear. And t e US Treasur( De%art&ent as sa"d one o' "ts o''"#"a$s 'e$t e !as as0ed to e$% Enron $ast (ear *( #o&%an( %res"dent La!ren#e ; a$$e(. Enron e-e#ut"2es a$so &et <"#e Pres"dent D"#0 C ene( and "s ener)( tas0 'or#e se2era$ t"&es to d"s#uss t e ad&"n"strat"on8s ener)( %$an. Des%"te &u# &ud s$"n)"n), t ere "s no "&%$"#at"on o' )u"$t as (et. T e Conser2at"2es and L"*era$ De&o#rats are de&and"n) an "nde%endent "n:u"r( "nto ! at t e( sa( #ou$d *e an a''a"r a*out #as /'or/a##ess.

And so an a))ress"2e a##ount"n) &et od *a#0ed u% *( %o$"t"#a$ su%%ort #reated a '"nan#"a$ s#anda$ t at "s st"$$ un'o$d"n) and re2ea$"n) ne! asso#"ated #o&%an"es "n s"&"$ar states o' *e"n).

. !hat "eall# ha$$ened%

A #o&*"nat"on o' a))ress"2e a##ount"n), o''/*a$an#e/s eet dea$s and *ro!/ *eat"n) o' e&%$o(ees and ad2"sers, a$$o!ed Enron &ana)e&ent to #reate a 2"rtua$ #o&%an( !"t 2"rtua$ %ro'"ts. Inter2"e!s !"t 'or&er e&%$o(ees and ana$(s"s *( a##ount"n) and $e)a$ e-%erts s o! t at Enron "n'$ated re2enues, 'or e-a&%$e *( treat"n) t e turno2er o' trad"n) t rou) "ts on$"ne su*s"d"ar( as re2enue. Enron *o$stered %ro'"ts *( *oo0"n) "n#o&e "&&ed"ate$( on #ontra#ts t at !ou$d ta0e u% to 1. (ears to #o&%$ete. It s "'ted de*ts "nto %artners "%s "t #reated and "n e''e#t #ontro$$ed, e2en t ou) de'"ned *( aud"tors as o'' *a$an#e s eet. It used su# ent"t"es to &an"%u$ate "ts a##ounts at t e end o' ea# :uarter and e&%$o(ed '"nan#"a$ der"2at"2es and ot er #o&%$e- transa#t"ons a))ress"2e$( to t e sa&e end and "t &as0ed %oor$( %er'or&"n) assets !"t ra%"d dea$/&a0"n). T e )rou% a$so e&%$o(ed an a))ress"2e ta- a2o"dan#e strate)(. A##ord"n) to C"t"5ens 'or Ta- =ust"#e, a ;as "n)ton ad2o#a#( )rou%, Enron1s %re/ta- %ro'"ts *et!een 1>>? and 2... tota$ed 31.@>*n and "t re#e"2ed net US 'edera$ tare*ates o' 3A81&. In on$( one (ear d"d Enron %a( 'edera$ ta- at a$$ / 31@& "n 1>>@. T e re%ort "ssued *( t e s%e#"a$ "n2est")at"on #o&&"ttee a%%o"nted *( t e Enron *oard ") $") ts so&e o' t ese strate)"es, &an( o' ! "# are used *( ot er $ar)e #o&%an"es. Enron, o!e2er, used t e& &ore a))ress"2e$( and #o&%re ens"2e$( t an &ost to #reate t e "&a)e o' a d(na&"# #or%orat"on !"t $o!er de*t, ") er re2enues and *"))er %ro'"ts t an Bust"'"ed *( "ts *us"nesses. To do t "s, Enron1s sen"or &ana)e&ent and sa$es tea& %$a#ed enor&ous %ressure on &"dd$e &ana)ers and on t e outs"de aud"tor, Andersen. ; en Enron1s r"s0 &ana)ers :uest"oned )enerous %ro'"t 'ore#asts, sen"or &ana)ers "ns"sted t e( !ou$d *e *orne out o2er t"&e. Enron1s o''/*a$an#e/s eet 2e "#$es %$a(ed a #entra$ ro$e "n e''orts to '$atter resu$ts. T ose ! o a2e e-a&"ned Enron1s a##ounts and %artners "% do#u&ents sa( "t stru#0 dea$s !"t t e %artners "%s "n t e '"na$ !ee0s o' ea# :uarter, re2ers"n) t e& ear$( t e ne-t :uarter a'ter Enron ad '"$ed a##ounts. T e #o&%an(1s %resentat"on on O#to*er 2?, 2..., to %artners "n L=M2 CoIn2est&ent, one o' t e #entra$ %artners "%s, $"sted 2C "n2est&ents s"n#e 'or&at"on "n De#e&*er 1>>>. +a$' #a&e "n t e '"na$ &ont o' a :uarter and n"ne "n t e $ast !ee0 o' t e a##ount"n) %er"od. T e "n2est")at"on sa"d t e ra%"d re2ersa$ o' &an( o' t ese dea$s and t e 'a#t t at L=M %artners "%s 6&ade a %ro'"t on every transa#t"on . . . #a$$ "nto :uest"on t e $e)"t"&a#( o' t e sa$es7. Su# transa#t"ons, &an( !"t ot er Enron/re$ated ent"t"es, &a( a2e e$%ed t e )rou% "n t!o !a(s, a##ord"n) to a##ountan#( e-%erts. T e( e$%ed to redu#e de*t te&%orar"$(, *ut a$so #reated %r"#e *en# &ar0s / t e so/#a$$ed 6est"&ated 'a"r 2a$ue7 used "n "ts a##ounts / so t e #o&%an( #ou$d ass")n )enerous 2a$ues to assets ran)"n) 'ro& %o!er %$ants to der"2at"2es. 4ran0 Partno(, a %ro'essor at t e Un"2ers"t( O' San D"e)o S# oo$ O' La! ! o as stud"ed Enron1s der"2at"2es transa#t"ons, to$d a #o&&"tteeD 6Enron entered "nto der"2at"2es transa#t"ons !"t t ese ent"t"es to s "e$d 2o$at"$e assets 'ro& :uarter$(

'"nan#"a$ re%ort"n) and to "n'$ate art"'"#"a$$( t e 2a$ue o' #erta"n Enron assets.7 Der"2at"2es, e added, !ere a$so used to 6 "de s%e#u$ator $osses "t su''ered on te# no$o)( sto#0s, "de u)e de*ts "n#urred to '"nan#e un%ro'"ta*$e ne! *us"nesses, "n#$ud"n) reta"$ ener)( ser2"#es 'or ne! #usto&ers and "n'$ate t e 2a$ue o' ot er trou*$ed *us"nesses, "n#$ud"n) "ts ne! 2entures "n '"*er/o%t"# *and!"dt 7. 4or so&e assets, su# as s ares trad"n) "n trans%arent &ar0ets, t ere "s $"tt$e or no $ee!a( "n de'"n"n) t e 6'a"r 2a$ue7 o' t e o$d"n). T e asset "s 6&ar0ed to &ar0et7 at t e :uoted %r"#e and a $oss or )a"n "s "n#$uded "n net "n#o&e. In t e #ase o' assets, su# as $on)/ter& ener)( #ontra#ts, "n ! "# t ere !as no trans%arent trad"n), Enron ad to est"&ate 'a"r 2a$ue. 6T ere !as no "nde%endent &ar0et # e#0 Eon 2a$ues o' $on)/ter& ener)( #ontra#tsF, *e(ond a*out 2C &ont s,7 sa(s ="& C anos, %res"dent o' G(n"0os Asso#"ates, a s ort/se$$"n) ed)e 'und t at %ro'"ted 'ro& t e de#$"ne "n Enron1s s ares. 6T ere !as no %u*$"#$( traded &ar0et.7

&. !h'ch (e"e the conse)uences%

Pro'"ts '")ures are &eant to s ed $") t on o! a #o&%an(Hand "ts sto#0 %r"#eH &") t 'are "n t e 'uture. But &an( e-%erts !orr( t at "n#reas"n)$( t e( don8t. T e s#anda$s at Enron and ;or$dCo& s o! t at a##ount"n) nu&*ers are &a$$ea*$e. And t e( are )ett"n) s:u"s "er as t e use o' est"&ates "n #o&%an( a##ounts "n#reases. ; et er t "s &a$$ea*"$"t( "s a %ro*$e& "s t e su*Be#t o' eated de*ate and #arr"es !"t "t "&%ortant #onse:uen#es. Re$"a*$e nu&*ers &ean t at "n2estors #an &a0e sound de#"s"ons. Bad ones $ead not Bust to t e "ne''"#"ent a$$o#at"on o' #a%"ta$ *ut a$so to a $oss o' #on'"den#e "n t e &ar0ets and, ! en 'raud "s "n2o$2ed, to u)e s are o$der $osses. E2er s"n#e a##ount"n) s "'ted 'ro& t e s"&%$e ta$$("n) o' #as "n and #as out to 6a##rua$ a##ount"n)7, ! ere %ro'"ts and e-%enses are *oo0ed ! en "n#urred, 'or!ard/$oo0"n) est"&ates a2e %$a(ed a #r"t"#a$ ro$e "n &easur"n) #o&%an( %ro'"ts. T "s ro$e as )ro!n as 60no!$ed)e/*ased7 e#ono&"es a2e *e)un to re%$a#e t e o$d !"d)et/&a0"n) 2ers"ons, and *us"nesses a2e *e#o&e &ore #o&%$e-. T e #o$$a%se o' Enron Cor%orat"on o''ers (et anot er dra&at"# re2ersa$ o' 'ortune 'or a #o&%an( t at *ene'"ted enor&ous$( Eand, %er a%s, "$$"#"t$(F 'ro& t e sto#0 &ar0et sur)e o' t e $ate 1>>.s. From the Wall Street of Manhattan to the Wall Street of New Haven, the Enron financial crisis has left some Americans wringing their hands in frustration and amazement. The December bankruptcy of the Houston-based energy giant Enron Corp. has left $15 billion of debts, with high-profile firms like JP Morgan revealing up to $800 million in exposure to debt. Enron was a company that many considered innovative, aggressive and imaginative, and its sudden and unexpected crumple has left many wondering about the further implications of the debacle. T e Enron 'a$$ do!n "s t e *"))est s#anda$ "n t e "stor( o' US #a%"ta$"s&. Not Bust a #or%orate 'a"$ure, Enron "s a s(&%to& o' t e stru#tura$ rottenness o' #a%"ta$"s&. T e nu&*ers *e "nd Enron !ere stunn"n), and a 3I?@ &"$$"on a##ount"n) adBust&ent !as on$( t e *e)"nn"n) o' t e #o&%an(1s '"nan#"a$ and %u*$"# 'a$$ do!n. A Mar# 1, 2..2, ABC1s 6;or$d Ne!s Ton") t7 stor( re2ea$ed t at, 6A##ord"n) to #o&%an( do#u&ents, Enron %a"d 3A2. &"$$"on to so&e e-e#ut"2es, on$( 1. &ont s *e'ore Enron #o$$a%sed. A##ord"n) to 4ortune &a)a5"ne "n 2..., Enron !as t e US1s se2ent /$ar)est #o&%an(, *ased on "ts #$a"&ed sa$es o' o2er 31..*n. Enron re%orted %ro'"ts o' o2er 31*n. Its sto#0 rose to 3>. a

s are, "ts tota$ &ar0et #a%"ta$"5at"on to 3@.*n. 4ortune $a*e$ed "t t e #ountr(1s J&ost "nno2at"2e #o&%an(1K "t !as !"de$( %ra"sed as t e J*us"ness &ode$1 'or t e Jne! e#ono&(1. B( De#e&*er 2..1 t e #o&%an( ad #ras ed, US #a%"ta$"s&1s *"))est #or%orate *an0ru%t#(. Its s ares !ere on$( !ort %enn"es, &ost o' "ts 2I,... !or0ers !ere out o' a Bo*. A&er"#a1s J#oo$est #o&%an(1 Eso Enron #$a"&edF !as e-%osed as a s%e#u$at"2e s e$$ #a&ou'$a)ed *( 'raudu$ent a##ount"n) L a 2"rtua$ #o&%an( %rodu#"n) 2"rtua$ %ro'"ts. Pre$"&"nar( "n2est")at"ons a2e re2ea$ed t at Enron1s *osses ad re%orted %ro'"ts t e #o&%an( a2e ne2er rea$$( &ade Eat $east 31*n *et!een =u$( 2... and O#to*er 2..1F, and #o2ered u% sta))er"n) de*ts and $osses. Dur"n) t e su&&er o' $ast (ear a nu&*er o' se#ond/$"ne Enron e-e#ut"2es *e)an to ra"se ser"ous a$$e)at"ons a*out t e #o&%an(1s &et ods. <"#e/%res"dent S erron ;at0"ns !rote to Enron1s # a"r, Gennet La(D 9I a& "n#red"*$( ner2ous t at !e !"$$ "&%$ode "n a !a2e o' a##ountan#( s#anda$s9. Anot er &ana)er notedD 9;e are su# a #roo0ed #o&%an(9. Enron1s *osses, ass"sted *( t e"r %rest")"ous $a!(ers and a##ountants, re2"e!ed t e a$$e)at"ons L and *rus ed t e& as"de. La( and ot er *osses, o!e2er, ra%"d$( *e)an se$$"n) o'' t e"r o!n Enron s ares, *et!een t e& %o#0et"n) o2er 31*n. Mean! "$e, "n an on/$"ne # at sess"on, La( to$d !or0ers t at t e #o&%an(1s s ares !ere an 9"n#red"*$e *ar)a"n9 ur)"n) t e& to 9ta$0 %os"t"2e$( a*out Enron to (our 'a&"$( and 'r"ends9. On ;a$$ Street, t e sto#0/*ro0"n) ar& o' C"t")rou%, ! "# ad &ade *") $oans to Enron and !as !e$$ a!are o' t e #o&%an(1s &ount"n) d"''"#u$t"es, !as st"$$ ur)"n) "n2estors to *u( Enron s ares. ; "$e t e *oardroo& rats !ere Bu&%"n) s "% !"t t e $oot, Enron !or0ers 'ound t at t e"r $"'e sa2"n)s !ere tra%%ed "n t e"r %ersona$ EC.10F %ens"on %$ans, ad&"n"stered *( Enron. En#oura)ed *( t e"r *osses, &ost o' t e #o&%an(1s !or0ers ad "n2ested &ost o' t e"r sa2"n)s "n Enron s ares, ! "# !ere !ort $ess *( t e t"&e t e( $ost t e"r Bo*s. ;or0ers a#ross t e US a2e a$so $ost out. O2er ?.M o' Enron1s @CC &"$$"on s ares !ere o!ned *( "nst"tut"ona$ "n2estors, &ost$( %ens"on 'unds and &utua$ 'unds "n ! "# &an( !or0"n) 'a&"$"es a2e "n2ested t e"r sa2"n)s. So, t e &ost o*2"ous Enron 2"#t"&s are "ts e&%$o(ees, ! o ad &u# o' t e"r ret"re&ent &one( 2ested "n Enron8s no!/!ort $ess sto#0. In 1>>@ Senator Bar*ara Bo-er %ro%osed '"-"n) t "s *( *ann"n) "n2est&ent o' &ore t an 1. %er#ent o' t e tota$ C.1E0F %$an "n t e e&%$o(er8s sto#0//t e &a-"&u& t at "n2est&ent e-%erts re#o&&end a %erson s"n0 "nto any #o&%an(, $et a$one one "n ! "# (ou82e a$so "n2ested (our Bo* %ros%e#ts. But t e *us"ness $o**( o!$ed, and #onser2at"2es !atered do!n t e *"$$ to t e %o"nt ! ere "t o''ered $"tt$e %rote#t"on to a%$ess Enron sta''ers La( no! #$a"&s t at e "s *ro0e. A%%ear"n) "n 'ront o' a #o$on"a$/st($e &ans"on, !"t a $"2er"ed ser2ant "n t e *a#0)round, La(1s !"'e L"nda to$d a te$e2"s"on re%orterD 9Ot er t an t e o&e !e $"2e "n N!ort 38&O, e2er(t "n) !e o!n "s 'or sa$eP T ere1s not "n) $e't9. +er us*and, s e sa"d !as du%edD 9Ne2er, ne2er, not 'or one se#ond !ou$d e a2e a$$o!ed an(t "n) to )o on t at !as "$$e)a$9. O2er t ree (ears 'ro& 1>>>, La( re#e"2ed o2er 32..& 'ro& Enron "n sa$ar( and sto#0 o%t"ons. +e a$so re#e"2ed o2er 31.& "n sto#0s 'ro& a$'/a/do5en ot er *") #or%orat"ons 'or ser2"n) as an o''"#er or d"re#tor. T e La(s o!n at $east t!ent( %ro%ert"es "n Te-as and Co$orado, !"t a tota$ 2a$ue o' o2er 3A.&. 6A##ount"n) and aud"t"n) "n t "s #ountr( "s "n a state o' #r"s"s,9 sa(s Pau$ A. <o$#0er, 'or&er C a"r&an o' t e 4edera$ Reser2e, ! o as *een "red *( t e Andersen Co&%an( "n t e !a0e o' t e *an0ru%t#( o'

t e ener)( trad"n) #o&%an(, Enron. In O#to*er 2..., Enron1s '"nan#"a$ #o2er !as *$o!n and t e '"nan#"a$ ouse o' #ards t at Andersen e$%ed to #reate #o$$a%sed "n '"2e !ee0s. ; at "s so sta))er"n), so a%%a$$"n), so outra)eous "s t at t "s on#e 3I. *"$$"on #o&%an( &e$ted to not "n)ness dur"n) t e %er"od No2e&*er 8, 2..1, ! en "t restated "ts earn"n)s retroa#t"2e to 1>>@, to De#e&*er 2, ! en "t '"$ed bankruptcy. Q T e Enron e#ono&"# 'a"$ure de&onstrates t at t e U.S. '"nan#"a$ re%ort"n) s(ste& "s *ro0e. A##ountants a2e so #o&%r"sed t e "nte)r"t( o' t e"r %ro'ess"on t at t ere "s $"tt$e reason to *e$"e2e an( '"nan#"a$ re%orts '"$ed !"t t e Se#ur"t"es and E-# an)e Co&&"ss"on. Enron "s not un":ue "n t e anna$s o' $o**("st "nterests %re2a"$"n) o2er t e %u*$"# "nterest. 4ro& #ontra#ts 'or unneeded !ea%ons to a *anana trade !ar, t e de#"s"ons tend to #o&e out "n 'a2or o' t e *") #ontr"*utors. ; at &a0es t e Enron stor( d"''erent "s t e dra&a o' t e u)e "&%$os"on "n 'u$$ 2"e! o' t ousands o' 2"#t"&"5ed e&%$o(ees and "n2estors.

*. Could that +e "e$eated%

A'ter an( *rea0do!n o' a %u*$"# "nst"tut"on, %o$"t"#"ans 'ee$ t e ur)e to 6'"-7 t "n)s so "t doesn1t a%%en a)a"n. O'ten, o!e2er, t e #ure "s !orse t an t e d"sease. T at1s t e #ase !"t t e %ro%osed re&ed"es 'o$$o!"n) t e #o$$a%se o' Enron. ; "$e t ere are no )uarantees t at "t !on1t a%%en a)a"n, Bo* Stron) sa(s "t "s $ess $"0e$( t at #o&%an"es !"$$ *e en)a)"n) "n t e sorts o' :uest"ona*$e dea$/&a0"n) and o#us/ %o#us a##ount"n) %ra#t"#es t at turned Enron "nto a ouse o' #ards.6I t "n0 '"r&s !"$$ *e &u# $ess !"$$"n) to %us t e en2e$o%e and do t "n)s "n unusua$ !a(s,7 e sa(s. 6A##ount"n) ru$es a2e a$!a(s %ro2"ded &ana)e&ent !"t a #erta"n a&ount o' '$e-"*"$"t( as to o! t e( and$e a %art"#u$ar transa#t"on, *ut %eo%$e are 2er( sens"t"2e to ! at a%%ened "n t e Enron #ase.7 In add"t"on to ne! re)u$ator( )u"de$"nes, e sa(s, 6I t "n0 !e !"$$ see 2o$untar( a#t"ons on t e %art o' '"r&s to &a0e sure t e( a2o"d a##ount"n) s#anda$s. 4ro& t e "n2estors1 %ers%e#t"2e, t at "s so&et "n) %os"t"2e t at #o&es out o' t e Enron s"tuat"on.7 Does t e Con)ress need to do an(t "n) "n t e '"rst %$a#eR T e Enron s#anda$ !as %r"&ar"$( a stor( o' e-e#ut"2es and aud"tors de#e"2"n) "n2estors a*out t e true state o' a *us"ness. I' "t !as 6)reed7 t at #aused t e de#e%t"on, "t !as )reed t at un#o2ered "t as !e$$. =a&es C anos, a &one( &ana)er ! o s%e#"a$"5es "n s ort/se$$"n) Es%e#u$at"n) t at a sto#01s %r"#e !"$$ 'a$$F, )ot !"nd o' Enron1s s enan")ans, and t"%%ed o'' a re%orter at 4ortune. Enron !as 'or#ed to restate "ts earn"n)s and a#0no!$ed)e "dden de*ts. At t e #enter o' t "s ! o$e #r"s"s "s t at 'a#t t at t e #o&%an( too0 undreds o' &"$$"ons o' do$$ars, "n2ested t e& "n re$at"2e$( r"s0( !a(s and 'a"$ed to re%ort t at "n "ts '"nan#"a$ state&ents and d"d t at !"t t e #o&%$"#"t( o' "ts aud"tors. ="& Green!ood sa"d D7 ; at !e a2e to do "' t ere #an *e a a%%( end"n) to t "s terr"*$e stor( "s t at !e "n Con)ress a2e to &a0e $a!s and &a0e "t 2er( #$ear t at e2er( $"a*"$"t( t at a #o&%an( as, e2er( "n2est&ent t at "t &a0es, e2er( do$$ar t at as at r"s0 "s trans%arent, "s 0no!n to t e "n2estors. ;e need to a2e #on'"den#e "n our #ountr( t at (ou #an &a0e "n2est&ents as r"s0( as (ou !ant or as sa'e as (ou !ant *ut at $east (ou 0no! ! at "t "s (ou8re )ett"n) "nto. And t at8s ! at !e a2e to a##o&%$"s so t at t "s ne2er a%%ens a)a"n.7
?