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Group 5 Andrew Beamon Brandon Hall Joseph Gasparini Matthew Pugh

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1 Group 5 Andrew Beamon Brandon Hall Joseph Gasparini Matthew Pugh
Enron Corp. Group 5 Andrew Beamon Brandon Hall Joseph Gasparini Matthew Pugh

2 Background Founded An American Energy Corporation
1985 Kenneth Lay Merger of Houston Natural Gas and InterNorth An American Energy Corporation External Auditor: Arthur Andersen LLP

3 Accounts Affected Mark-to-Market Accounting Losses
Written off to SPE Assets inflate profits Purchased assets Projected revenues immediately recorded to books

4 Key Individuals Kenneth Lay Jeffrey Skilling Andrew Fastow Founder/CEO
Retired 2001 Jeffrey Skilling CEO Retired after 6 months Andrew Fastow CFO Mastermind of fraud

5 Detecting the Fraud Bethany McLean Sherron Watkins
Fortune Magazine writer Sherron Watkins VP of Corporate Development Wrote an anonymous letter to Lay about accounting practices

6 Concealing the Fraud Executives circumvented accounting rules to artificially increase earnings The use of special purpose entities aka “Raptors” to buffer earnings Picked out bad investments, then hedged them

7 Arthur Andersen Shredded subpoenaed documents
Was paid $25 million for auditing services and $27 million for consulting services Prior allegations with Waste Management and Sunbeam Senior executives of Enron worked for Arthur Andersen

8 Preventative Actions Arthur Andersen Board of Directors CEO/CFO
External auditor and consultant Board of Directors Too much upper management involved Lack of attention caused overlook of financials due to incentives and compensation CEO/CFO Wasn’t responsible for signing off on financial statements

9 Preventative Actions Consolidation Disclosure Requirements
Didn’t have to show all entities together which inflated assets and revenues Disclosure Requirements Less requirements for detailing certain accounts Sarbanes Oxley Act 2002

10 Key People Today Kenneth Lay- Deceased
Jeffrey Skilling- Currently in prison Andrew Fastow- Completed prison time and now traveling the country

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