Enron Scandal: Analysis and Impact

Individual report
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Table of Contents
INTRODUCTION...........................................................................................................................3
ISSUE..........................................................................................................................................3
RULES.........................................................................................................................................4
APPLICATION...........................................................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................8
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INTRODUCTION
In ILAC method it is necessary to find out issues and laws that are being applied to case.
This is because it becomes easy to analyse entire case and find out what laws are applicable. In
every country there are various types of laws and regulation which is followed. These laws differ
as per government. The business has to adhere these laws so that they work in ethical way.
Similarly, in present report Enron case will be discussed with help of ILAC method. also, it will
be explained about what laws are applied in it (Abrams,, 2016).
ISSUE
This is a case which resulted in banking fraud of united state energy. It occurred due to
different events that happened in nation new law in year 1990 natural gas affected on firm rights
and its operations. In this Jeffery who was consultant of company transformed entire firm into
trader. This deal with energy derivative contract and act as mediator between natural gas
producer and customers. He identified loopholes in accounting method and on basis of that
prepared financial report. With that he hide millions of dollars of debt and also failed some
deals. The CFO Andrew Fastow and other seniors also join him in this and they mislead BOD.
Besides that, they also pressurize Arthur Andersen as well to ignore issues related to scandal. But
shareholder of company filed a case of decrease in share from $90 to $1 in November 2001.
Thus, after dispute US security and exchange commission investigated the case to identify cause
behind it. But at same time competitor firm Houston competitor Dynegy offered a proposal to
buy that company. It was analysed that due to several reason the deal was not done. so, on
December 2001 company stated that they were bankrupt and filed it under chapter 11 of
bankruptcy code. This was the largest bankruptcy case of $63.4 billion in US (Bhasin, 2016).
Similarly, in next year another scandal occurred that is worldcom scandal. In that many people
were found to be guilty and set to jail by court. So, Arthur was also guilty for hiding info related
to SEC and doing illegal auditing of firm. The organisation lost its brand value and many
customers. but supreme court of US overturned the decision. Also, shareholder lost their amount
and only few people were given claim amount. Lay and skiling gave resign after it and Andrew
was not allowed to work for company. There are large number of lawsuits filed against Anderson
by shareholders and hence company is unable to operate in later stage. The scandal highly
impacted on laws related to accounting leads to new regulation and legislation to it.
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