MGT 355 MWF 11 am 12/7/17
Case Study #7
Enron: Were They the Crookedest Guys in the Room?
1. Cookie jar reserves are financial reserves from profitable years that management builds up to later be used in unprofitable years to make the financial statements look more profitable than it truly appears to be. One way Enron used the “cookie jar” concept was with David Delainey, the former head of Enron’s Energy Services unit. Skilling told Delainey to transfer the losses from the unit’s trading contracts to their wholesale division to hide a $260 million loss. Another way Enron used this concept was with the mark-to-market accounting method. This method has no quoted price for an accurate representation for the energy industry. Enron used this to their advantage in stating their income and could control their appeared income amount for any year this manipulation was taken place.
2. The employees of Enron lost their jobs and all their retirement funds. Shareholders lost all investments that and any interest built on them. Customers were …show more content…
Enron, created with the merger of, had many unethical transactions that led to the demise of the energy company. Through the top managers that conducted illegal and unethical acts lead Enron to file Chapter 11 bankruptcy, the largest bankruptcy in U.S. history. After this was brought to light, an investigation was started to find the reason of why such a large amount of money in losses was never found. The executives; Jeffery Skilling, Kenneth Lay, Andrew and Lea Fastow, Richard Causey, and David Delainey; were later trialed and found guilty on a many different counts of a multitude of different illegal acts. Skilling’s sentenced came to be the longest at 24 years and 4 months with also paying out $60 million for compensation of Enron victims and legal bills. Most were sent to prison but Lay who died of a heart attack before his conviction was made. Enron went out of business in